Contents

Chapter 6
Supplementary contribution

Changes to rules of contribution

6.11Under this proposal, plaintiffs would retain the right to seek the full amount from a single liable defendant from the outset. But if one liable defendant has paid more than their court-ordered contribution after all rights to contribution have been exhausted, that defendant may apply for supplementary contribution orders to spread the “overpayment” between itself and other solvent defendants (and also third parties that the court has previously held liable to contribute to one or more defendants). Such subsequent orders would only allocate responsibility for the unallocated share – there would be no impact on or revisiting of any original orders for contribution. The court should normally allocate liability to make supplementary contributions in proportions that reflect the relative shares of responsibility among the remaining solvent parties – the first-called defendant and the other defendants from whom supplementary contribution is sought.

6.12In the example above, the plaintiff would still be able to claim $100,000 from D1 immediately after judgment. Unlike the status quo, once it is established that D2 is unavailable, D1 would be able to return to court for an order that D3 pay an additional $21,400 in supplementary contribution – their proportionate share of the $30,000 that has proved to be uncollectable from D2.71 (D1 can already seek up to $50,000 contribution without a further court order, under the original awards).

6.13This achieves a more just end result between solvent defendants without requiring the plaintiff to pursue separate judgments or return to court at any stage. The outcome will be more certain and predictable for defendants, and less arbitrary for those with deep pockets. It retains all advantages of joint and several liability for plaintiffs but deals more fairly with the issues that arise when one or more defendants are unable to pay.

6.14The result should be more predictable outcomes for defendants and so better prospects for resolving respective obligations by agreement. If a well-resourced defendant has the option and grounds to apply for a subsequent contribution order, this may be enough to encourage another solvent defendant to pay or negotiate regarding their share, without incurring further costs.

6.15The proposal can be implemented by an addition to the existing provisions governing contribution in section 17 of the Law Reform Act 1936. A draft provision was developed in the proposed Civil Liability and Contribution Bill contained in the Law Commission’s 1998 Report: Apportionment of Civil Liability.72 The provision includes a one-year limitation for applications, which is sensible and consistent with what we suggest for applications from minor defendants.73 We recommend below that the 1998 draft be used as the basis for a suitable amendment to the 1936 Act. A copy of the draft Bill is included.74
6.16Such a provision will be effective in cases of contribution and supplementary contribution governed by the statutory regime. The change will not automatically apply to matters involving equitable contribution, unless a more detailed reform is undertaken of contribution and related matters, such as that which was recommended in Apportionment of Civil Liability.75 We trust that courts called upon to consider a suitable case applying equitable rules may adopt a similar approach as the proposed change, preserving as it does the essence of contribution.

Recommendations

R6 The rules of contribution should be extended to allow a defendant required to pay all or part of a share of liability left unpaid by another defendant, to apply for supplementary contribution from other solvent defendants or judgment debtors. A court or tribunal ordering supplementary contribution should do so by ordering contributions proportionate to the shares of responsibility of each solvent party, including the applicant.

R7 The additional rule should be modelled on proposed section 17 of a draft Civil Liability and Contribution Bill appended to the Law Commission’s Report, Apportionment of Civil Liability, and added, with all necessary modifications, to the existing provisions governing contribution in section 17 of the Law Reform Act 1936.

71The uncollected share is $30,000. D1 and D3’s comparative liability, ignoring the missing D2, is for 2/7ths and 5/7ths respectively, based on the original contribution orders. So D3 must still reimburse D1 the $50,000 maximum contribution originally ordered, plus 5/7ths of $30,000 or $21,400 (slightly rounded). D1 still must bear 2/7ths of the uncollected share, ($8,600) but this is better than paying the whole $30,000, and is proportionate.
72Law Commission Apportionment of Civil Liability (NZLC R47, 1998) at [7.26].
73At [5.30].
74Refer to Appendix B.
75Law Commission, above n 72. Despite developments in other areas since 1998 and as s 17 demonstrates, the reforms proposed to contribution, the law regarding contributory negligence and related issues in Apportionment of Civil Liability are still apposite and worthy of serious consideration. The objects of this current reference can be achieved through introduction of the amendments to the Law Reform Act 1936 that we have recommended. However those amendments would be more coherent and achieve wider reform at little or no cost if they were included in a Bill modelled on that presented in Apportionment of Civil Liability.